Naming-Rights Deal, New Standard in Sponsorship

The value of the naming-rights to professional stadiums and arenas plateaued with the economic recession in 2008. With almost 30% of the naming-rights sponsors at professional venues being financial service institutions this makes a lot of sense. Prior to the recession, Citigroup secured the rights to the New York Met’s new stadium, Citi Field, for 20-years and $400 million dollars or $20 million annually. Some naming rights deals came under flak, but none as much as Citigroup, as they ended up receiving a federal bailout. Recently there has been an influx of naming-rights deals for professional stadiums and arenas. In the last two weeks, the Minnesota Vikings and Tennessee Titans have secured partnerships. The value of the naming-rights deals is often dependent upon a number of factors including the market size, frequency of events, and number of impressions the stadium name will garner the company. These impressions typically include television broadcasts, social media, digital, print media and number of spectators. The naming-rights for an NFL venue typically would garner much more than an MLS stadium for the added prestige as well as the increased number of impressions the venue’s sponsor will garner over the life of the contract.

Naming-rights deals are typically lengthy, due to the nature of the agreement. Many naming-rights deals can lead to nicknames for the venues, and lead to the sponsors being synonymous with the venue. An example of this would the ‘The Forum’, which was short for the St. Petersburg Times Forum, home of the Tampa Bay Lightning. It is now known as the Amalie Arena, but many local outlets and fans still call it ‘The Forum’. The average length for the 19 MLB stadiums that I was able to find term lengths for was 22.3 years, the longest of the four major US sports.

Like most marketing agreements, there are multiple facets to these deals. The sponsors are not only paying for the naming-rights and signage there are typically larger strategies within these agreements. Here is a draft of the agreement signed between the San Jose Sharks and SAP. Typically, organizations highly value these agreements for the long-term annual revenue stream they provide. The average annual revenues garnered by the naming-rights for MLB stadiums were $3.5m per year. Some organizations do not sell naming-rights for their venues due to the perceived value of their branding. Examples of these stadiums in Major League Baseball include Yankee Stadium, Fenway Park and Wrigley Field. Occasionally venues struggle to sell their naming-rights, such as the Dallas Cowboys. The Dallas Cowboys called their new venue Cowboys Stadium until they reached an agreement with AT&T in 2013. AT&T Stadium generates the Cowboys $17m per year in revenues or the next 20 years. The Cowboys put this valuation on it and refused to change their asking price until they found a partner that was willing to pay their price.

These naming-rights deals do not always run their course. Early exit agreements can be negotiated when venues or the sponsor no longer value the partnership. Often, sponsors continue their relationship with the organization through different marketing capacities. There are a number of naming-rights deals that are nearing expiration including BMO Field, M&T Bank Stadium, O.Co Coliseum, Qualcomm Stadium, Toyota Park and the Verizon Center. O.Co Coliseum and Qualcomm Stadium, both serving as homes to NFL teams in California, are nearing the end of their usefulness and in dire need of replacement or renovation. The Verizon Center, home to the Washington Capitals and Wizards, as well as the Georgetown Hoyas, will be seeking a new sponsor, as Verizon has announced that they will not renew the partnership. New venues for the Detroit Red Wings and the Atlanta Falcons are in the market competing against existing venues without a naming-rights deal such as the Palace at Auburn Hills (home to the Detroit Pistons).

These sponsorships appeal to a large group of global, international and local companies. They can be viewed as high risk – high reward because of the high cost associated with the sponsorship. Due to the long-term status of these deals, they are not always available. There is a limited inventory and as with all sponsorships, it must make sense for both parties and be a part of an overarching theme or strategy. These deals are important in order to fund the improvements and renovations at many stadiums and are becoming more common at colleges and for stadiums in minor leagues across the country. As organizations around the world see the success and mutual benefits experienced by the teams and sponsors, these deals become more commonplace overseas as well. Overseas it is common for the naming-rights to be grouped in with their kit (jersey) sponsors such as for Manchester City (Ethiad Stadium) or Arsenal (Emirate Stadium). Recently, Real Madrid of La Liga secured a naming-rights deal in order to finance repairs of their stadium. This practice will only continue to grow as teams see the opportunity for a new revenue stream.

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